5 savings-boosting tips for the end of the tax year
11 July, 2017
It's the final stretch of the 2018/19 tax year. How exciting! For those of us who still have ISAs and pensions to shuffle about, there’s going to be some boring money stuff to do over the next couple of weeks… but there are also free government incentives to claim. Here’s how to make the most of your tax relief savings in time for the 5th April deadline.
1. Save £20,000 tax-free in an ISA, split between cash and investments
You can open one cash ISA and one stocks and shares ISA each year
Any cash interest or investment returns you make are tax-free
Cash ISA interest rates are very low, but you can access your money any time
Stocks and shares ISAs may be suitable if you can leave your money invested for at least 5–10 years – but nothing’s ever guaranteed
If you’re not confident with the stock market yet and don’t want to rush into picking the wrong investments, you could open a stocks and shares ISA, stick in some cash by the 5th April tax deadline, and then pick your investments later. They’ll still be protected from the taxman.
More about choosing your ISA (https://www.boringmoney.co.uk/learn/articles/best-stocks-and-shares-isa-2019/)
2. Got some ISA allowance left? Move some of your investments
If you’ve stashed your cash in your ISAs and still have some of your £20,000 tax-free allowance left, there may be a way to mop up the last few drops. If you have any old shares in a trading account you could move them into an ISA with a bit of paper shuffling.
‘Bed and ISA’ is the questionably named manoeuvre you can make with the help of some online investment platforms. Essentially they let you sell your shares to yourself free of charge – from your old trading account to your new ISA account. Nifty, eh?
3. Each of your kids can save £4,260 in a Junior ISA
As with adults’ ISAs, Junior ISAs come in both cash and stocks and shares varieties. You and your family can pay into them until your child’s 18th birthday, and it can add up to being a handy head start for uni fees, a car or anything else they desire – they’ll have full access to the money when they turn 18.
If you’re opening a Junior ISA now for a littlun aged 8 or under, that means you have at least 10 years to leave the savings untouched, which is a great time-frame for stocks and shares.
4. Max out your pension with free top-ups from the government
Save up to £40,000 a year into a private pension
For every £80 you save, the government will give you £20 in tax relief
If you’re a higher rate tax payer, you can claim another £20 on your tax return
Your private pension can be a generator of free money. 20% ‘tax relief’ on up to £40,000 means you only have to pay £32,000 to max it out for the year – the government top ups the remaining £8,000 (20%). Then ‘compound interest’ kicks in over the decades and your pension investment snowballs into a tidy retirement pot.
5. Carry forward pension allowance from the previous three years
Used up your £40,000 allowance for this year? If you had any unused allowance left over from last year, or the two years before that, you can use that up now too and top up your pension pot that little bit more. Read more about ‘pensions carry forward (https://www.boringmoney.co.uk/learn/articles/can-i-carry-forward-my-pension-allowance/)’ here.
If, on the other hand, you haven’t used up all your £40,000 pension allowance, you can undertake another questionably named manoeuvre: ‘Bed and SIPP’. As with ‘Bed and ISA’, you can move investments from an old trading account into your pension and get tax relief for doing so. Double nifty!
Happy tax-saving, folks. If you need help picking a stocks and shares ISA, check out our top picks for this tax year (https://www.boringmoney.co.uk/learn/articles/best-stocks-and-shares-isa-2019/). And to compare providers for investments, ISAs and pensions, don’t forget our Best Buys (https://www.boringmoney.co.uk/isas-pensions/isas-pensions/) – independent ratings and reviews by customers and experts.